No Slowing Down Cliffs Natural Resources, US Steel

By Ben Levisohn

Steel stocks have picked up where they left off last week–with more gains.

AFP/Getty Images

United States Steel (X) has gained 3.1% to $19.39 today, while AK Steel (AKS) has gained 4.6% to $3.73 and Steel Dynamics (STLD) has jumped 3.2% to $16.33. The odd man out: Nucor (NUE), which has dropped 1% to $48.71.

Domestic steel stocks increased 2.2% on average for the week, outperforming the broader markets, which declined 0.8-1.5%. Sheet pricing continues to march higher (albeit temporarily due to supply disruptions), the commodity market got a boost from improved sentiment on China (upped steel production forecasts and recorded record iron ore imports), and steel imports into the US have moderated (down 11% YoY). The only negative is weak earnings quarters, though investors likely view reset expectations as a positive.

U.S. iron-ore miners have also risen thanks to China optimism. Cliff’s Natural Resources (CLF), for one, has jumped 3.1% to $25.09 today, continuing a hot streak that saw it gain 18% last week. Dubinsky and Chaudhri explain:

The increase was due to speculative trading on improved China sentiment; China’s National Development and Reform Commission increased its forecast for 2013 Chinese steel production growth to 9% YoY (to 780M MT), up from 4% YoY (to 746M MT). Chinese customs data also showed that Chinese imports of iron ore hit a record high in July (+17% MoM to 73.1M MT).

Jefferies’ European mining team suspect investors could be making contrarian bets:

Mining shares have significantly underperformed the market this year. It is possible that investors are rotating out of winners and into laggards, especially those laggards that are exposed to improving fundamentals. We have noticed a very strong increase in investor interest in the mining sector recently.

Still, after the big gains, Jefferies is “reluctant to chase mining shares higher,” although they suspect BHPBilliton (BHP) and Rio Tinto (RIO) still possess “reasonable upside” of 15% or more.

Rio Tinto has dropped 0.4% to $49.62 today, while BHP has gained 0.2% to $67.78.

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Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.